Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Proposed Rule Change to Adopt FINRA Rule 5230 (Payments Involving Publications that Influence the Market Price of a Security) in the Consolidated FINRA Rulebook, 39725-39726 [E9-18978]

Download as PDF Federal Register / Vol. 74, No. 151 / Friday, August 7, 2009 / Notices (C) Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments relating to the proposed rule change have been solicited or received. FICC will notify the Commission of any written comments received by FICC. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective upon filing pursuant to Section 19(b)(3)(A)(iii) of the Act 5 and Rule 19b–4(f)(4) 6 thereunder because the proposed rule change effects a change in an existing service of FICC that (i) does not adversely affect the safeguarding of securities or funds in the custody or control of FICC or for which it is responsible and (ii) does not significantly affect the respective rights of the clearing agency or persons using the service. At any time within sixty days of the filing of such rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission’s Public Reference Section, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filings also will be available for inspection and copying at the principal office of FICC and on FICC’s Web site at https://www.dtcc.com/ legal/rule_filings/FICC/2009.php. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–FICC–2009–07 and should be submitted on or before August 28, 2009. For the Commission by the Division of Trading and Markets, pursuant to delegated authority.7 Florence E. Harmon, Deputy Secretary. [FR Doc. E9–18977 Filed 8–6–09; 8:45 am] Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–FICC–2009–07 on the subject line. pwalker on DSK8KYBLC1PROD with NOTICES IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: SECURITIES AND EXCHANGE COMMISSION Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–FICC–2009–07. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will BILLING CODE 8010–01–P [Release No. 34–60422; File No. SR–FINRA– 2009–048] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Proposed Rule Change to Adopt FINRA Rule 5230 (Payments Involving Publications that Influence the Market Price of a Security) in the Consolidated FINRA Rulebook August 3, 2009. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on July 21, 2009, Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) (f/k/a National Association of Securities 7 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 5 15 U.S.C. 78s(b)(3)(A)(iii). 6 17 CFR 240.19b–4(f)(4). VerDate Nov<24>2008 17:09 Aug 06, 2009 1 15 Jkt 217001 PO 00000 Frm 00121 Fmt 4703 Sfmt 4703 39725 Dealers, Inc. (‘‘NASD’’)) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by FINRA. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change FINRA is proposing to adopt NASD Rule 3330 (Payment Designed to Influence Market Prices, Other than Paid Advertising) as FINRA Rule 5230 in the consolidated FINRA rulebook, with several changes to clarify the scope of the rule. The text of the proposed rule change is available on FINRA’s Web site at https://www.finra.org, at the principal office of FINRA and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, FINRA included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. FINRA has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose As part of the process of developing a new consolidated rulebook (‘‘Consolidated FINRA Rulebook’’),3 FINRA is proposing to adopt NASD Rule 3330 into the Consolidated FINRA Rulebook as FINRA Rule 5230 with 3 The current FINRA rulebook consists of (1) FINRA Rules; (2) NASD Rules; and (3) rules incorporated from NYSE (‘‘Incorporated NYSE Rules’’) (together, the NASD Rules and Incorporated NYSE Rules are referred to as the ‘‘Transitional Rulebook’’). While the NASD Rules generally apply to all FINRA members, the Incorporated NYSE Rules apply only to those members of FINRA that are also members of the NYSE (‘‘Dual Members’’). The FINRA Rules apply to all FINRA members, unless such rules have a more limited application by their terms. For more information about the rulebook consolidation process, see FINRA Information Notice, March 12, 2008 (Rulebook Consolidation Process). E:\FR\FM\07AUN1.SGM 07AUN1 39726 Federal Register / Vol. 74, No. 151 / Friday, August 7, 2009 / Notices pwalker on DSK8KYBLC1PROD with NOTICES several changes, which are described below.4 NASD Rule 3330 provides that no member may, ‘‘directly or indirectly, give, permit to be given, or offer to give, anything of value to any person for the purpose of influencing or rewarding the action of such person in connection with the publication or circulation in any newspaper, investment service, or similar publication, of any matter which has, or is intended to have, an effect upon the market price of any security.* * *’’ The rule includes an exception for any matter that is ‘‘clearly distinguishable as paid advertising.’’ As part of transferring NASD Rule 3330 into the Consolidated FINRA Rulebook, FINRA is proposing two changes to the rule to modernize its terms and clarify its scope. First, the proposed rule change updates the list of media to which the rule refers. Because NASD Rule 3330 has not been amended for over 60 years, it refers only to matters published or circulated in any ‘‘newspaper, investment service, or similar publication.’’ The proposed rule change updates this language to include electronic and other types of media, including magazines, Web sites, and television programs. Second, the proposed rule change expands the exceptions in the rule beyond paid advertising to also include compensation paid in connection with research reports and communications published in reliance on Section 17(b) of the Securities Act of 1933.5 FINRA is proposing these changes to clarify that the prohibitions in the rule are not intended to cover compensation paid for publications that are explicitly permitted pursuant to other rules. For example, NASD Rule 3330 could be read to prohibit a member from paying for a third-party research report if the report affected the market price of a security; however, NASD Rule 2711(h)(13) contemplates that members might pay for and distribute third-party research reports.6 In addition, FINRA 4 The proposed rule change also changes the title of the rule to ‘‘Payments Involving Publications that Influence the Market Price of a Security.’’ 5 Section 17(b) of the Securities Act of 1933 provides that no person may ‘‘publish, give publicity to, or circulate any * * * communication which, though not purporting to offer a security for sale, describes such security for a consideration received or to be received, directly or indirectly, from an issuer, underwriter, or dealer, without fully disclosing the receipt, whether past or prospective, of such consideration and the amount thereof.’’ 15 U.S.C. 77q(b). 6 Although the proposed rule change would exempt research reports from FINRA Rule 5230, research reports would still be subject to applicable FINRA rules and guidance governing research reports and other communications with the public. See NASD Rules 2711, 2210(d), IM–2210–1. Among VerDate Nov<24>2008 17:09 Aug 06, 2009 Jkt 217001 does not believe that the rule should be read to prohibit compensation paid in connection with the publication of information that is specifically permitted pursuant to Section 17(b) of the Securities Act, provided the required disclosures are made. FINRA will announce the implementation date of the proposed rule change in a Regulatory Notice to be published no later than 90 days following Commission approval. 2. Statutory Basis FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act,7 which requires, among other things, that FINRA rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. FINRA believes that the proposed rule change will clarify the scope of the rule in the new Consolidated FINRA Rulebook. B. Self-Regulatory Organization’s Statement on Burden on Competition FINRA does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve such proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and other things, these rules require that research reports include certain disclosures, be fair and balanced, and not be misleading. 7 15 U.S.C. 78o–3(b)(6). PO 00000 Frm 00122 Fmt 4703 Sfmt 4703 arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–FINRA–2009–048 on the subject line. Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–FINRA–2009–048. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of FINRA. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–FINRA– 2009–048 and should be submitted on or before August 28, 2009. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.8 Florence E. Harmon, Deputy Secretary. [FR Doc. E9–18978 Filed 8–6–09; 8:45 am] BILLING CODE 8010–01–P 8 17 E:\FR\FM\07AUN1.SGM CFR 200.30–3(a)(12). 07AUN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 74, Number 151 (Friday, August 7, 2009)]
[Notices]
[Pages 39725-39726]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-18978]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60422; File No. SR-FINRA-2009-048]

Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Proposed Rule Change to Adopt
FINRA Rule 5230 (Payments Involving Publications that Influence the
Market Price of a Security) in the Consolidated FINRA Rulebook

August 3, 2009.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on July 21, 2009, Financial Industry Regulatory Authority, Inc.
(``FINRA'') (f/k/a National Association of Securities Dealers, Inc.
(``NASD'')) filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been prepared by FINRA. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------

\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

FINRA is proposing to adopt NASD Rule 3330 (Payment Designed to
Influence Market Prices, Other than Paid Advertising) as FINRA Rule
5230 in the consolidated FINRA rulebook, with several changes to
clarify the scope of the rule.
The text of the proposed rule change is available on FINRA's Web
site at https://www.finra.org, at the principal office of FINRA and at
the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, FINRA included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. FINRA has prepared summaries, set forth in sections A,
B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
As part of the process of developing a new consolidated rulebook
(``Consolidated FINRA Rulebook''),\3\ FINRA is proposing to adopt NASD
Rule 3330 into the Consolidated FINRA Rulebook as FINRA Rule 5230 with

[[Page 39726]]

several changes, which are described below.\4\
---------------------------------------------------------------------------

\3\ The current FINRA rulebook consists of (1) FINRA Rules; (2)
NASD Rules; and (3) rules incorporated from NYSE (``Incorporated
NYSE Rules'') (together, the NASD Rules and Incorporated NYSE Rules
are referred to as the ``Transitional Rulebook''). While the NASD
Rules generally apply to all FINRA members, the Incorporated NYSE
Rules apply only to those members of FINRA that are also members of
the NYSE (``Dual Members''). The FINRA Rules apply to all FINRA
members, unless such rules have a more limited application by their
terms. For more information about the rulebook consolidation
process, see FINRA Information Notice, March 12, 2008 (Rulebook
Consolidation Process).
\4\ The proposed rule change also changes the title of the rule
to ``Payments Involving Publications that Influence the Market Price
of a Security.''
---------------------------------------------------------------------------

NASD Rule 3330 provides that no member may, ``directly or
indirectly, give, permit to be given, or offer to give, anything of
value to any person for the purpose of influencing or rewarding the
action of such person in connection with the publication or circulation
in any newspaper, investment service, or similar publication, of any
matter which has, or is intended to have, an effect upon the market
price of any security.* * *'' The rule includes an exception for any
matter that is ``clearly distinguishable as paid advertising.''
As part of transferring NASD Rule 3330 into the Consolidated FINRA
Rulebook, FINRA is proposing two changes to the rule to modernize its
terms and clarify its scope. First, the proposed rule change updates
the list of media to which the rule refers. Because NASD Rule 3330 has
not been amended for over 60 years, it refers only to matters published
or circulated in any ``newspaper, investment service, or similar
publication.'' The proposed rule change updates this language to
include electronic and other types of media, including magazines, Web
sites, and television programs.
Second, the proposed rule change expands the exceptions in the rule
beyond paid advertising to also include compensation paid in connection
with research reports and communications published in reliance on
Section 17(b) of the Securities Act of 1933.\5\ FINRA is proposing
these changes to clarify that the prohibitions in the rule are not
intended to cover compensation paid for publications that are
explicitly permitted pursuant to other rules. For example, NASD Rule
3330 could be read to prohibit a member from paying for a third-party
research report if the report affected the market price of a security;
however, NASD Rule 2711(h)(13) contemplates that members might pay for
and distribute third-party research reports.\6\ In addition, FINRA does
not believe that the rule should be read to prohibit compensation paid
in connection with the publication of information that is specifically
permitted pursuant to Section 17(b) of the Securities Act, provided the
required disclosures are made.
---------------------------------------------------------------------------

\5\ Section 17(b) of the Securities Act of 1933 provides that no
person may ``publish, give publicity to, or circulate any * * *
communication which, though not purporting to offer a security for
sale, describes such security for a consideration received or to be
received, directly or indirectly, from an issuer, underwriter, or
dealer, without fully disclosing the receipt, whether past or
prospective, of such consideration and the amount thereof.'' 15
U.S.C. 77q(b).
\6\ Although the proposed rule change would exempt research
reports from FINRA Rule 5230, research reports would still be
subject to applicable FINRA rules and guidance governing research
reports and other communications with the public. See NASD Rules
2711, 2210(d), IM-2210-1. Among other things, these rules require
that research reports include certain disclosures, be fair and
balanced, and not be misleading.
---------------------------------------------------------------------------

FINRA will announce the implementation date of the proposed rule
change in a Regulatory Notice to be published no later than 90 days
following Commission approval.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\7\ which requires, among
other things, that FINRA rules must be designed to prevent fraudulent
and manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest. FINRA believes that the proposed rule change will
clarify the scope of the rule in the new Consolidated FINRA Rulebook.
---------------------------------------------------------------------------

\7\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

FINRA does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others

Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-FINRA-2009-048 on the subject line.

Paper Comments

Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2009-048. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for inspection
and copying in the Commission's Public Reference Room, 100 F Street,
NE., Washington, DC 20549, on official business days between the hours
of 10 a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of FINRA. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-FINRA-2009-048 and should be
submitted on or before August 28, 2009.
---------------------------------------------------------------------------

\8\ 17 CFR 200.30-3(a)(12).

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-18978 Filed 8-6-09; 8:45 am]
BILLING CODE 8010-01-P

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